“The economic numbers have been holding up really well,”
said Brad Sorensen, director of market and sector analysis at
San Francisco-based Charles Schwab Corp. His firm has $2.01
trillion in client assets. “The home data show that the housing
market is rebounding and should continue to contribute to
growth. It helps to feed into consumer confidence as well.
They’re related. In a time when we see more uncertainty rising,
decent economic data helps to calm things down a little bit.”

Equities rose as data showed purchases of new homes in the
U.S. jumped in January to the highest level since July 2008,
indicating the industry will keep adding to growth in the
economy. Home prices in 20 U.S. cities rose in the 12 months to
December by the most in more than six years. Confidence among
U.S. consumers jumped more than forecast in February.

Bernanke Testimony

Federal Reserve Chairman Ben S. Bernanke defended the
central bank’s unprecedented asset purchases, saying they are
supporting the expansion with little risk of inflation or asset-price bubbles. He spoke today in prepared testimony to the
Senate Banking Committee in Washington.

Automatic federal budget cuts set to begin March 1 will put
a “significant” burden on the economy if lawmakers can’t avert
the reductions, Bernanke told lawmakers in the first day of his
semiannual monetary policy report to Congress. He also urged
lawmakers to put the budget on a “sustainable long-run path.”

Bernanke and his colleagues on the Federal Open Market
Committee are debating whether to curtail $85 billion in monthly
bond-buying amid concern the Fed’s record $3.1 trillion balance
sheet may encourage excessive risk-taking by investors and
complicate the Fed’s exit from easing. Several participants at
the Jan. 29-30 meeting said the Fed should be prepared to vary
the pace of purchases as the economic outlook changes, according
to minutes released last week.

Italy’s Election

Global stocks fell as Italy’s election deadlock reignited
concern Europe’s debt crisis will deepen. As results pointed to
a hung parliament, Italy was headed toward a political stalemate
that threatens to derail 15 months of austerity under Prime
Minister Mario Monti’s government. Former Italian Prime Minister
Silvio Berlusconi acknowledged rival Pier Luigi Bersani’s narrow
victory in the lower house of Parliament and said he’s open to a
broad alliance to avoid a second election.

The S&P 500 has gained 5 percent this year as U.S.
lawmakers agreed on a compromise on taxes in January and amid
better-than-estimated corporate earnings. About 75 percent of
the S&P 500 companies that have released quarterly results beat
profit estimates, according to data compiled by Bloomberg. The
index trades at 14.8 times reported earnings, below the average
since 1954 of 16.4.

Biggest Gains

All 10 groups in the S&P 500 gained today as commodity and
consumer discretionary companies had the biggest gains. A
measure of 11 homebuilders in S&P indexes jumped 4.2 percent.
PulteGroup gained 5.7 percent to $19.05. KB Home increased 7.2
percent to $18.37.

The Chicago Board Options Exchange Volatility Index, which
measures the cost of using options as insurance against declines
in the S&P 500, slumped 11 percent to 16.87. The gauge, which
yesterday surged the most since 2011, had the biggest drop since
Jan. 2 today.

Home Depot added $3.64 to $67.56. Rising home values are
encouraging consumers to spend more on remodeling while the
repairs after Hurricane Sandy spurred demand in the U.S.
Northeast. The average purchase at Home Depot, the largest U.S.
home-improvement retailer, rose 5.6 percent to $55.46 while the
number of customer transactions increased 8.6 percent to 329.1
million, helped by an extra week in the quarter.

Macy’s gained $1.07 to $39.59. The company will earn as
much as $3.95 a share this year, the Cincinnati-based retailer
said in a statement today. The analysts surveyed by Bloomberg
estimated $3.84 on average.

Apple Climbs

Apple climbed 1.4 percent to $448.97. The company should
split its stock 10 for 1 rather than follow a proposal by
Greenlight Capital Inc.’s David Einhorn for a new class of
dividend-paying preferred stock, Laurence Balter, chief market
strategist at Oracle Investment Research, said in a note today.
A stock split would spur a rally in the shares by attracting
individual investors willing to buy Apple at a lower price,
while Einhorn’s plan would deplete the company’s cash flow, he
said.

SanDisk Corp. gained 2.2 percent to $50.39. The maker of
flash memory for mobile devices was raised to outperform, which
is the equivalent of buy, at RBC Capital Markets by equity
analyst Doug Freedman. The 12-month share-price estimate is $65.

JPMorgan Chase & Co. lost 0.2 percent to $47.60, after
gaining as much as 1.2 percent earlier today. The biggest U.S.
bank plans to reduce headcount by as many as 19,000 people in
its mortgage and community banking businesses through 2014 as
Chief Executive Officer Jamie Dimon cuts expenses.

‘Mad Men’

Best Buy Co. fell 3.2 percent to $16.46. The biggest
consumer electronics retailer cut 400 jobs at its headquarters
as Chief Executive Officer Hubert Joly works to reduce costs.
Joly, who took charge in September, is working on a plan
announced last year to reduce costs by $750 million as the
retailer works to compete with rivals such as Amazon.com Inc.

Tyson Foods Inc. dropped 3.7 percent to $22.40 as the
largest U.S. meat processor said margins narrowed in its beef
and pork units.

“Margins have been compressed throughout the past month as
the value of beef has fallen more than the price of cattle,”
James Lochner, chief operating officer of Springdale, Arkansas-based Tyson, said at the Goldman Sachs 17th Annual Agribusiness
Conference today.

Retail Sales

Retail sales are rising fast enough to indicate the effects
of tax-law changes and gasoline-price increases on consumer
spending will be fleeting, according to Jonathan Golub, UBS AG’s
chief U.S. equity strategist. Last month’s 4.4 percent sales
increase from a year earlier almost matched the average 4.6
percent pace for the previous 20 years. The comparison is based
on figures compiled by the Commerce Department.

“The general trend appears to be quite healthy” even
though the end of a payroll-tax break, a delay in income-tax
refunds and higher gas prices are weighing on consumers, Golub
wrote yesterday in a report.

Golub favors makers of food, beverages and other staples,
as well as companies most dependent on consumers’ discretionary
spending. His view ran counter to a recommendation yesterday by
David Bianco, a strategist at Deutsche Bank AG. Both strategists
are based in New York.

Bianco reaffirmed “underweight” ratings on staples
companies and retailers in a report, citing a “continuing
struggle of low- to middle-income households to make ends
meet.” His call means the two groups ought to be a smaller
percentage of investors’ holdings than their weight in the
Standard & Poor’s 500 Index would suggest.